Home Equity Loan Rates for May 2023

Homeowners can tap into their home’s equity with a home equity loan, but don’t expect interest rates to fall any time soon. Despite softer inflation data, home equity loan rates continue to hold steady above 8%. 

During its May meeting, the Federal Reserve announced a 25-basis-point (or 0.25%) increase to its benchmark federal funds rate. The central bank has hiked interest rates 10 times since last March in an effort to rein in inflation. 

The good news is that the most recent Fed hike may not have a huge impact on interest rates for home equity loans. “What’s already priced into the market is an expectation of a certain pace of increases,” said Rob Cook, vice president of marketing digital and analytics for Discover Home Loans. “So [a rate hike] may not change things unless there’s a surprise in inflation data.” 

Inflation has been slowly but steadily declining since its peak last June of 9.1%. The most recent Consumer Price Index shows inflation at 4.9% in April, down from 5.0% in March. 

Interest rates for home equity loans track the Fed’s federal funds rate, so homeowners looking to borrow with a home equity loan could see some rate increases in response to the most recent rate hike. However, home equity loans have fixed interest rates, meaning those with existing home equity loans won’t see any changes to their monthly payments. 

“Ultimately, I think [home equity loan rates] will be driven by the pace of inflation, because that’s what the Fed is trying to control by raising rates,” Cook said. “So, if inflation isn’t under control they’re going to take stronger action and that’s what would result in higher rates,” he added. 

Home equity loans offer more competitive interest rates than personal loans and credit cards, but they come with a major risk. If you miss multiple payments, you could lose your home. When leveraging your home’s equity, consider what you’re going to do with the money as well as how you plan to pay it back. Home equity loans are commonly used to make home improvements, such as adding solar panels, that will in turn increase the value of your home. 

If you have 15% to 20% of equity in your home and are considering tapping into it, here’s everything you need to know about how home equity loans work and where to find the best rates.

This week’s home equity loan rates

Here are the average rates for home equity loans and home equity lines of credit, as of May 10, 2023.

Current home equity loan rates and trends

In recent weeks, home equity loan rates have been fluctuating around 8.00%. On the heels of the Federal Reserve’s May meeting, these rates stayed flat from the previous week. 

The central bank has been hiking interest rates in an effort to bring inflation back down to its 2% target. Increases to the federal funds rate determine what banks charge each other to borrow money. That affects the cost to borrow money across the economy, particularly with a home equity loan and a home equity line of credit, or HELOC. 

However, the central bank may be nearing the end of the current rate hiking cycle. While recent inflation data leaves the possibility of another rate hike in June on the table, the Fed has signaled that it is nearing a level it expects will be sufficient to bring inflation down. 

Interest rates for home equity loans and HELOCs will continue to move in concert with any hikes to the federal funds rate. But if inflation continues on its downward trajectory and the Fed is able to hold rates where they are, interest rates for home equity loans may not have much further to rise. 

“If [the Fed] signals that they’re near the end of raising rates and the market is able to anticipate that, I think rates will level off,” Cook said.

Top home equity loan rates of May 2023

Note: The above annual percentage rates are current as of May 10, 2023. Your APR will depend on such factors as your credit score, income, loan term and whether you enroll in autopay or other lender specific requirements.

Best home equity loan lenders of May 2023

U.S. Bank

Good for nationwide availability

U.S. Bank is the fifth largest banking institution in the US. It offers both home equity loans and HELOCs in 47 states. You can apply for a home equity loan or HELOC through an online application, by phone or in person. If you want a loan estimate for a home equity loan without completing a full application, you can get one by speaking with a banker over the phone.

• APR: From 7.45%
• Max LTV ratio: Not specified
• Max debt-to-income ratio: Not specified
• Min credit score: 660
• Loan amount: $15,000 to $750,000 (up to $1 million for California properties)
• Term lengths: Up to 30 years
• Fees: None
• Additional requirements: Subject to credit approval
• Perks: You can receive a 0.50% rate discount by enrolling in automatic payments from a U.S. Bank checking or savings account

TD Bank

Good for price transparency

Primarily operating on the East Coast, TD Bank offers home equity loans and HELOCs in 15 states. You can apply for a TD Bank home equity loan or HELOC online, by phone or by visiting a TD Bank in person. The online application includes a calculator that will tell you the maximum amount you can borrow based on the information you input. You can also see a full breakdown of rates, fees and monthly payments. No credit check is required for this service.

• APR: From 6.99% (0.25% autopay discount included)
• Max LTV ratio: Not specified
• Max debt-to-income ratio: Not specified
• Min credit score: Not specified
• Loan amount: From $10,000
• Term lengths: Five to 30 years
• Fees: $99 origination fee at closing. Closing costs only application to loan amounts greater than $500,000.
• Additional requirements: Loan amounts less than $25,000 are only available for primary residence property use.
• Perks: You will receive a 0.25% discount if you enroll in autopay from a TD personal checking or savings account.

Connexus Credit Union

Good branch network

Connexus Credit Union operates in all 50 states, but it offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland and Texas). The credit union has more than 6,000 local branches. To apply for a home equity loan or HELOC with Connexus, you can fill out a three-step application online or in person. You won’t be able to see a personalized rate or product terms without a credit check.

• APR: From 8.99%
• Max LTV ratio: 90%
• Max-debt-to-income ratio: Not specified
• Min credit score: Not specified
• Loan amount: From $5,000
• Term lengths: Five to 15 years
• Fees: No annual fee. Closing costs can range from $175 to $2,000 depending on your loan terms and property location. It has returned loan payments fees of $15, convenience fees of $9.95 (for paying by debit or credit card online) and $14.95 (for paying by phone) and a forced place insurance processing fee of $12.
• Additional requirements: Because Connexus is a credit union, its products and services are only available to members. Member eligibility is open to most people: you (or a family member) just need to be a member of one of Connexus’s partner groups, reside in one of the communities or counties on Connexus’s list or become a member of the Connexus Association with a $5 donation to Connexus’s partner nonprofit.
• Perks: Flexible membership options

KeyBank

Good online application user experience

Based in Cleveland, KeyBank offers home equity loans to customers in 15 states and HELOCs to customers in 44 states. Aside from a standard home equity loan, KeyBank offers a few different HELOC options. The KeyBank application allows you to apply for multiple products at one time. If you’re not sure whether KeyBank loans are available in your area, the application will tell you once you input your ZIP code. If you’re an existing KeyBank customer, you can skim through the application and import your personal information from your account.

• APR: From 10.79% (0.25% client discount included)
• Max LTV ratio: 80% for standard home equity loans, 90% for high-value home equity loans
• Max debt-to-income ratio: Not specified
• Min credit score: Not specified
• Loan amount: From $25,000
• Term lengths: One to 30 years
• Fees: Origination fee of $295. Closing costs aren’t specified.
• Additional requirements: Borrowers must be 18 years of age and reside in one of the states KeyBank operates in.
• Perks: KeyBank offers a 0.25% rate discount for clients who have eligible checking and savings accounts with them.

Spring EQ

Good option for high debt-to-income ratio limits

Spring EQ was founded in 2016 and serves customers in 38 states. Spring EQ offers home equity loans and HELOCs. Spring EQ does not display rates for its home lending products online -- you must complete an application to see your personalized rate. The Spring EQ loan application process is simple though. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their social security number.

• APR: Not specified
• Max LTV ratio: 90%
• Max debt-to-income ratio: 50%
• Min credit score: 640
• Loan amount: Up to $500,000
• Term lengths: Not specified
• Fees: Spring EQ loans may be subject to an origination fee of $995 and an annual fee of $99 in some states.
• Additional requirements: Spring EQ does not display rates for its home lending products online -- you must complete an application to see your personalized rate.
• Perks: Spring EQ has a higher maximum DTI ratio than most other lenders -- compare 50% to the typical 43% average.

Third Federal Savings & Loan

Good option for rate match guarantee

Third Federal Savings & Loan first opened in 1938. Today, the bank offers home equity loans in eight states and HELOCs in 26 states. Third Federal offers a lowest rate guarantee on its HELOCs and home equity loans, meaning Third Federal will offer you the lowest interest rate relative to other similar lenders or pay you $1,000. You can apply for a home equity loan or HELOC on the Third Federal website. You won’t have to register an account to apply, but you’re still able to save your application and return to it later.

• APR: From 6.49%
• Max LTV ratio: 80%
• Max debt-to-income ratio: Not specified
• Min credit score: Not specified
• Loan amount: $10,000 to $200,000
• Term lengths: Five to 30 years
• Fees: Home equity loans and HELOCs with Third Federal have an annual fee of $65 (waived the first year). There are no application fees, closing fees or origination fees.
• Additional requirements: Specific requirements are not listed.
• Perks: If you set up autopay from an existing Third Federal account, you’ll be eligible for a 0.25% rate discount.

Frost Bank

Good option for Texas borrowers

Frost Bank’s home equity loans and HELOCs are only available to Texas residents. You can apply for a home equity loan or HELOC on the Frost Bank website, but you’ll need to create an account. According to the website, the application will only take you 15 minutes.

• APR: 5.88% (0.25% autopay discount included, only available for 2nd liens)
• Max LTV ratio: 90%
• Max debt-to-income ratio: Not specified
• Min credit score: Not specified
• Loan amount: $2,000 to $500,000
• Term lengths: 15 or 20 years
• Fees: No application fee, annual fee or closing costs. Frost Bank does charge a $15 monthly service fee, which can be waived with a Frost Plus Account.
• Additional requirements: Borrowers must reside in Texas. The bank also requires proof of homeowners insurance.
• Perks: 0.25% rate discount for clients who enroll in autopay from a Frost Bank checking or savings account. However, this feature is only available for second liens.

Regions Bank

Good rate discounts

Regions Bank is one of the nation’s largest banking, mortgage and wealth management service providers. Regions offers home equity loans and HELOCs in 15 states. You can apply for a Regions home equity loan or HELOC online, in person or over the phone. You’ll have to create an account with Regions to apply. Before you create an account, though, you can use the bank’s own rate calculator to estimate your rate and monthly payment.

• APR: From 6.375% (0.25% autopay discount included)
• Max LTV ratio: 89%
• Max debt-to-income ratio: Not specified
• Min credit score: Not specified
• Loan amount: $10,000 to $250,000
• Term lengths: Seven, 10, 15, 20 or 30 years
• Fees: No closing costs and no annual fees. Late fees apply for 5% of the payment amount. There is a returned check fee of $15 and an over limit fee of $29.
• Additional requirements: Not specified.
• Perks: Rate discounts between 0.25% and 0.50% to those who elect to have their monthly payments automatically debited from a Regions checking account.

Discover

Good option for no fees or closings costs

Discover is known primarily for its credit cards, but it also offers home equity loans -- available in 48 states. The lender does not offer HELOCs at all. You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website.

• APR: 6.24% for first liens, 7.49% for 2nd liens
• Max LTV ratio: 90%
• Max debt-to-income ratio: 43%
• Min credit score: 620
• Loan amount: $35,000 to $300,000
• Term lengths: 10, 15, 20 and 30 years
• Fees: None
• Additional requirements: Specific requirements not listed.
• Perks: The lender charges no origination fees, application fees, appraisal fees or mortgage taxes.

BMO Harris

Good option for second liens

BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. You can apply for a home equity loan or HELOC online or in person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates does not require a hard credit check.

Home equity loans from BMO Harris are only available as second liens. If you have already paid off your mortgage, a rate-lock HELOC from BMO Harris may be a better option.

• APR: From 8.04% (0.50% autopay discount not included)
• Max LTV ratio: Not specified
• Max debt-to-income ratio: Not specified
• Min credit score: 700
• Loan amount: From $5,000
• Term lengths: Five to 20 years
• Fees: There is no application fee. BMO Harris will also pay closing costs for loans secured by an owner-occupied 1-to-4-family residence. If you pay off your loan within 36 months of opening, you may be responsible for recoupment fees.
• Additional requirements: Home equity loans are only available as as second lien (meaning you can’t be mortgage free)
• Perks: If you enroll in autopay with a BMO Harris checking account, you’ll be eligible for a 0.50% rate discount.

What is a home equity loan?

A home equity loan is a fixed-rate installment loan secured by your home. You’ll get a lump sum payment upfront and then repay the loan in equal monthly payments over a period of time. Because your house is used as collateral, the lender can seize it if you default on your payments.

Most lenders require you to have 15% to 20% equity in your home in order to secure a home equity loan. To determine how much equity you have, subtract your remaining mortgage balance from the value of your home. For example, if you have a $500,000 mortgage and you owe $350,000 on it, you have $150,000 in equity -- 30% available equity. Lenders will typically let you borrow around 80% to 85% of your home’s equity. In this example, you can borrow roughly $120,000 to $127,500.

A standard repayment period for a home equity loan is between five and 30 years. Under the loan, you make fixed-rate payments that never change. If interest rates go up, your loan rate remains locked.

Second mortgages such as home equity loans and HELOCs don’t alter a homeowner’s primary mortgage. This lets you borrow against your home’s equity without needing to exchange your primary mortgage’s rate for a new, higher one.

Home equity loans have fixed interest rates, which is a positive if you’re looking for predictable monthly payments. The rate you lock in when you take out your loan will be constant for the entire term, even if market interest rates rise. 

A home equity loan is a good choice if you need a large sum of cash all at once. You can use that cash for anything you’d like. However, some of the most common uses include home improvement like adding solar panels, college tuition and debt consolidation. 

Avoid using a home equity loan for discretionary expenses like a vacation or wedding. It may not be worth the risk of losing your home.

Home equity loan vs. HELOC

Home equity loans and HELOCs are similar, but have a few key distinctions. Both let you draw on your home’s equity and require you to use your home as collateral to secure your loan. The two major differences are the way you receive the money and how you pay it back. 

A home equity loan gives you the money all at once as a lump sum, whereas a HELOC lets you take money out in installments over a long period of time, typically over 10 years. Home equity loans have fixed-rate payments that will never go up, but most HELOCs have variable interest rates that rise and fall with the economy and overall interest-rate trends. 

A home equity loan is better if:

• You want a fixed-rate payment: Your monthly payment will never change even if interest rates rise.
• You want one lump sum of money: You receive the entire loan upfront with a home equity loan.
• You know the exact amount of money you need: If you know the amount you need and don’t expect it to change, a home equity loan likely makes more sense than a HELOC.

A HELOC is better if:

• You need money over a long period of time: You can take the money as you need it and only pay interest on the amounts you withdraw, not the full loan amount, as is the case with a home equity loan.
• You want a low introductory interest rate: Although HELOC rates may increase over time, they also typically offer lower introductory interest rates than home equity loans. So, you could save money on interest charges.

Home equity loans vs. cash-out refinances

A cash-out refinance is when you replace your existing mortgage with a new mortgage, typically to secure a lower interest rate and more favorable terms. Unlike a traditional refinance, though, you take out a new mortgage for the home’s entire value -- not just the amount you owe on your mortgage. You then receive the equity you’ve already paid off in your home as a cash payout. 

For example, if your home is worth $450,000 and you owe $250,000 on your loan, you would refinance for the entire $450,000, rather than the amount you owe on your mortgage. Your new cash-out refinance home loan would replace your existing mortgage, and then offer you a portion of the equity you built (in this case $200,000) as a cash payout. 

Both a cash-out refi and a home equity loan will provide you with a lump sum of cash that you’ll repay in fixed amounts over a specific time period, but they have some important differences. A cash-out refinance replaces your current mortgage payment. When you receive a lump sum of cash from a cash-out refi, it’s added back onto the balance of your new mortgage, usually causing your monthly payment to increase. A home equity loan is different -- it does not replace your existing mortgage and instead adds an additional monthly payment to your expenses. 

A home equity loan is better if:

• You don’t want to pay private mortgage insurance: Some cash-out refinances require PMI, which can add hundreds of dollars to your payments, but home equity loans do not.
• You can’t complete a refinance: With rates rising, it’s possible that your mortgage rate is lower than current refinance rates. If that’s the case, it likely won’t make financial sense for you to refinance. Instead, you can use a home equity loan to only take out the money you need, rather than replacing your entire mortgage with a higher interest rate loan.

A cash-out refinance is better if…

• Refinance rates are lower than your current mortgage rate: If you can secure a lower interest rate by refinancing, this could save you money in interest, while providing access to a lump sum of cash. 
• You only want one monthly payment: The amount you borrow gets added back to the balance of your mortgage so you only make one payment to your lender every month.
• Less stringent eligibility requirements: If you don’t have great credit or you have a high debt-to-income ratio, or DTI, you may have an easier time qualifying for a cash-out refi compared to a home equity loan. 
• Lower interest rates: Cash-out refinances sometimes offer more favorable interest rates than home equity loans.

Who qualifies for a home equity loan?

Although it varies by lender, to qualify for a home equity loan you’re typically required to meet the following criteria:

• At least 15% to 20% equity built up in your home: Home equity is the amount of home you own. Subtract what you owe on your mortgage and other loans from the current appraised value of your house to get that number.
• Adequate, verifiable income and stable employment: Proof of income is a standard requirement to qualify for a home equity loan. Check your lender’s website to see what forms and paperwork you will need to submit along with your application. 
• A minimum credit score of 620: Lenders use your credit score to determine the likelihood that you’ll repay the loan on time. Having a strong credit score -- at least 700 -- will help you qualify for a lower interest rate and more amenable loan terms. 
• A debt-to-income ratio of 43% or less: Divide your total monthly debts by your gross monthly income to get your DTI. Like your credit score, your DTI helps lenders determine your capacity to make consistent payments toward your loan. Some lenders prefer a DTI or 36% or less.

Tips for choosing a lender

You’ll want to consider what type of financial institution best suits your needs. In addition to mortgage lenders, financial institutions that offer home equity loans include banks, credit unions and online-only lenders. 

“Select a lender that makes you feel comfortable and informed with the home equity loan process,” Cook says. “Look at what tools a lender makes available to borrowers to help inform their decision. For many borrowers, being able to apply and manage their application online is important.”

One option is to work with the lender that originated your first mortgage as you already have a relationship and a history of on-time payments. Many banks and credit unions also offer discounted rates and other benefits when you become a customer. 

Some lenders offer lower interest rates but charge higher fees (and vice versa). What matters most is your annual percentage rate because it reflects both interest rate and fees. 

Ensure the specific terms of the loan your lender is offering make sense for your budget. For example, be sure the minimum loan amount isn’t too high -- be wary of withdrawing more funds than you need. You also want to make sure that your repayment term is long enough for you to comfortably afford the monthly payments. The shorter your loan term, the higher your monthly payments will be. 

“Costs and fees are an important consideration for anyone who is looking for a loan,” Cook says. “Homeowners should understand any upfront or ongoing fees applicable to their loan options. Also look for prepayment penalties that might be associated with paying off your loan early.” 

No matter what, it’s important to talk to numerous lenders and find the best rate available. 

How to apply for a home equity loan

Applying for a home equity loan is similar to applying for any mortgage loan. You’ll need both a solid credit score and proof of enough income to repay your loan. 

1. Interview multiple lenders to determine which lender can offer you the lowest rates and fees. The more companies you speak with, the better your chances of finding the most favorable terms. 

2. Have at least 15% to 20% equity in your home. If you do, lenders will then take into account your credit score, income and current DTI to determine whether you qualify as well as your interest rate.

3. Be prepared to have financial documents at the ready, such as pay stubs and Form W-2s. Proof of ownership and the appraised value of your home will also be necessary. 

4. Close on your loan. Once you submit your application, the final step is closing on your loan. In some states, you’ll have to do this in person at a physical branch. 

FAQs

Methodology

We evaluated a range of lenders based on factors such as interest rates, APRs and fees, how long the draw and repayment periods are, and what types and variety of loans are offered. We also took into account factors that impact the user experience such as how easy it is to apply for a loan online and whether physical lender locations exist.

More mortgage tools and resources

Use CNET’s mortgage calculator to help you determine how much house you can afford. The CNET mortgage calculator factors in variables such as the size of your down payment, home price and interest rate to help you understand how much of a difference even the slightest increase in your rate can make in the amount of interest you’ll pay over the lifetime of your loan.